Under the national energy guarantee prices are expected to rise to $80 per MWh after the Yallourn coal-fired power station closes in 2028.
Photograph: Bloomberg/Getty Images

A national energy guarantee with a more ambitious emissions reduction target of 45% by 2030 would lead to power prices falling over the life of the scheme in contrast to the Turnbull government’s proposal, according to new modelling.

With the Neg bound for a make-or-break meeting in August, the new number crunching by the respected energy analysts RepuTex, funded by Greenpeace, boosts the case for emissions reduction in the scheme to be made more ambitious.

The modelling, to be released on Friday, compares the impact of the Turnbull government’s proposal – which has an emissions reduction target of 26% and would lead to prices rising – with the 45% target favoured by federal Labor.

It suggests under the more ambitious emissions reduction target, wholesale power prices would fall by a quarter to around $60 per megawatt hour (MWh) by 2030, as more renewables enter the energy mix. In contrast, under the Neg, power prices would be at just over $80.

Prices are higher in the Coalition’s proposal because coal continues to dominate the market, investment in large-scale renewables is largely static, and gas takes a higher share to provide flexible dispatchable power as coal assets leave the system.

Over the life of the Turnbull government’s scheme, wholesale electricity prices are forecast to fall initially, reflecting the entry of already committed renewable capacity, then rise above $70 per MWh after the Liddell coal plant in New South Wales closes, then climb to $80 per MWh after the expected retirement of Yallourn in Victoria 2028.

But RepuTex says if the emissions reduction target was higher, at 45%, the policy would impose a constraint on emissions from coal-fired generators, and drive more new investment in large-scale renewables, adding more than 22GW of solar and wind capacity.

“Similar to the price decline under the 26% scenario prior to 2020, the competitive pressure from higher solar and wind energy is modelled to push wholesale prices lower, eventually resulting in the closure of excess coal capacity,” the analysis says.

The modelling assumes the AGL-owned Liddell plant closes in 2022, with other coal plants retiring closer to 2030. It then assumes renewables will displace some dispatch of gas generation during the day, which increases the opportunity for energy storage of excess renewable energy.

“As a result wholesale electricity prices oscillate around $60 per MWh through to 2030, rather than rise above $80 per MWh as seen under the low investment scenario under a 26% Neg,” the analysis says.

While some business groups are relaxed about the Neg having a higher emissions reduction target than 26%, particularly if that leads to a bipartisan agreement – the Business Council of Australia and the Turnbull government have branded a 45% target reckless.

The energy minister, Josh Frydenberg, has struggled to build a party-room consensus for 26%, and some Nationals are lobbying to bolt more coal into the system.

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A number of Labor states have already signalled it will be difficult to agree to a Neg with a 26% emissions reduction target, and the new modelling reinforces previous analysis that the Neg as currently envisaged would have no impact on emissions reduction, given a 26% reduction in emissions in electricity will be met under current policy by 2024.

It suggests the current policy will have no impact on driving new renewables investment, with 42% of generation coming from renewable energy sources by 2030 under the business-as-usual scenario. If the target was increased to 45%, renewables would reach 50% of electricity generation by 2030.

The Turnbull government has had support from much of the business community and the energy industry for the Neg on the basis it could end a decade of partisan warfare over climate and energy policy.

Behind the scenes, the Energy Security Board is working with stakeholders to smooth over flashpoints in the working groups on the policy, including a desire that larger energy users are not caught by the reliability obligation in the scheme.

Guardian Australia also understands the big power companies are unhappy with the market liquidity obligation in the Neg – a technical component of the policy supposed to ensure that large customers have access to contracts to cover a forecast reliability gap. However, despite the bumps, the expectation is that the final design of the scheme will be settled by the end of July.

Green groups and the solar industry are marshalling ahead of the make-or-break meeting of the Coag energy council in August in an effort to convince the Victorian and Queensland governments to torpedo the scheme unless the level of ambition in emissions reduction is increased.

Any one of the states and territories can sink the policy because consensus is required across the jurisdictions to implement a change in the current national energy market rules.

“The Neg is not a policy but a political document for Malcolm Turnbull to appease Tony Abbott and the coal-obsessed far right of the Coalition,” the Greenpeace Australia Pacific head of research and investigations, Nikola Casule, said.

“Turnbull’s motives are clear, but the silence of Victorian premier, Daniel Andrews, and Queensland premier, Annastacia Palaszczuk, demands an explanation,” he said. “Both leaders have far more ambitious renewable energy and emissions reduction targets than the federal government, yet have not ruled out waving through a policy that will do nothing to lower emissions or power prices”.

Greenpeace and GetUp have produced television advertisements to run in Victoria and Queensland in the weeks leading up to the energy council meeting in an effort to put political pressure on the larger Labor states.

A range of stakeholders think the Australian Capital Territory government – which has led the public pushback against the scheme on the basis of the low emissions reduction target – will be reluctant to sink the scheme if one of the larger states doesn’t adopt the same position.

The ACT climate change minister, Shane Rattenbury, said this week that abstaining at the Coag energy council meeting was a technical option.

Casule said if the Labor states sign on to the policy as currently envisaged, “they will own the consequences of hobbling the renewables revolution as much as Malcolm Turnbull and Tony Abbott already do”.

“It will become Daniel Andrews’ and Annastacia Palaszczuk’s Neg – the higher power bills, environmental damage and carbon pollution that will result will be theirs,” he said.